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# Cmmon size income statement

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Key Financial Data
Dreamscape, Inc. Industry Average
Ratio For the Year Ended For the Year Ended
(% of Sales) December 31, 2004 December 31, 2005
Cost of goods sold 74.5% 70.0%
Gross profits 25.5 30.0
Selling expense 8.0 7.0
Gen. & admin. expense 5.1 4.9
Depreciation expense 2.4 2.0
Total operating expense 15.5 13.9
Operating profits 10.0 16.1
Interest expense 1.4 1.0
Net profits before taxes 8.6 15.1
Taxes 2.4 6.0
Net profits after taxes 5.2 9.1

Income Statement, Dreamscape, Inc.
For the Year Ended December 31, 2005
Sales revenue \$1,000,000
Less: Cost of goods sold 750,000
Gross profits \$ 250,000
Less: Operating expenses
Selling Expense \$70,000
Gen. & admin. expense 48,000
Depreciation expense 20,000
Total operating expense \$ 138,000
Operating profits \$ 112,000
Less: Interest expense \$ 20,000
Net profits before taxes \$ 92,000
Less: Taxes \$ 36,800
Net profits after taxes \$ 55,200
Prepare a common size income statement for Dreamscape, Inc. for the year ended December 31, 2005. Evaluate the company's performance against industry average ratios and against last year's results.

##### Solution Summary

The solution explains how to prepare a common size income statement and use it to evaluate the company's performance

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